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Sluggish quarter for TV broadcast networks

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Sluggish quarter for TV broadcast networks

As the second quarter of the financial year FY2015 draws to a close, it is time to look at the performance of TV broadcast networks. The quarter that includes the months of July, August and September marks the beginning of the festive season. Hence, supposed to culminate to a growth that is reflected in the balance sheets of these TV networks.

In the previous quarter, the revenue growth had been positive for broadcasters. For instance during Q1FY2015 ZEEL’s revenues grew by 11.6% year on year which was driven by 17.4% Y-o-Y growth in advertising revenues according to a Sharekhan research report. TV18 Broadcast on the other hand recorded a 33% increase in revenue in Q1FY2015, which was Rs 5.2 billion with operating profits rising to 42%, which was Rs 182 million. Raj Television Network similarly recorded a net profit of Rs 2.92 crore during Q1FY2014 with sales turnover of Rs 19.11 crore in comparison to Rs 17.91 crore in Q4FY2014.      

However, Q2FY2015 was different, since it also marked the change in government at the centre sparking up the economy and the investment spirit with it. But has it truly had any impact on the Q2 results of the TV broadcast industry?  

Q2 results not so attractive

The second quarter results of the current financial year for Zee Entertainment Enterprises Ltd. (ZEEL) have not been that great. It posted operating revenues of Rs 11,178 million in Q2FY2015, while in the corresponding quarter of the previous year it posted Rs 11,013 million. This is an increase of only 1.5% year-on-year. The operating profit (EBIDTA) increased by 3.2% in Q2FY2015 from Q2FY2014. However, the major blow for ZEEL comes in the Profit After Tax (PAT) where it saw a reduction in the profits by 3.9% from Q2FY2014. PAT for Q2FY2015 stood at Rs 2,270 million, while that that of Q2FY2014 stood at Rs 2,363 million.

The reason attributed for the reduced financial results was the change in the accounting treatment of domestic and international subscription revenues. This was as a result of the change in TRAI’s content aggregator regulation and change in the arrangement with various operators across international territories. This is true, as ZEEL’s advertising revenues have grown while the subscription revenues have been low in comparison with the corresponding quarter. The broadcaster’s advertising revenues grew by 7.3% year-on-year from Rs 5,833 million in Q2FY2014 to Rs 6,259 million in Q2FY2015. Subscription revenues went down by 7.3% to Rs 4,245 million in Q2FY2015 from Rs 4,581 million in Q2FY2014. This impacted the total revenues of the channel, which was only increased by 1.5% from the corresponding quarter.

While most of the channels in the network managed to do well during the quarter, the network incurred losses of Rs 250 million in its Sports channel bouquet. The business revenues generated in sports channels during Q2FY2015 were Rs 1,181 million while it incurred costs of Rs 1,431 million.

Punit Goenka, MD and CEO, ZEEL in a release to the press said, “Our quarterly performance has been satisfactory. It has been a mixed quarter as far as TV industry advertising spends is concerned. Even though the overall economic sentiment was positive during the quarter, it translated into increased advertising spends only during the fag end of the quarter. Our expectation is that the advertising spends will continue to increase during the rest of the year. Our performance in the quarter reflects industry wide trend. On the subscription front, the transition of distribution of channels from MediaPro to Taj Television is now complete and we continue to grow in high single digits. Implementation of digitisation in the remaining parts of the country will push the growth momentum further. We have also enhanced our HD offering with the launch of ‘&Pictures HD’. As a result of our consistent performance, we continue to maintain healthy operating margins.”

Another network, Multi Screen Media (MSM) claims to have grown since the last quarter and the corresponding quarter of the previous financial year. According to Rohit Gupta, President, MSM   though all channels have grown in terms of revenues, some have grown by 20-30% during this quarter. However, he said that due to IPL during the first quarter of the financial year and major revenues coming from the property, it wouldn’t be fair to compare the first quarter to the second. “It varies between channels, because the first quarter is very big because of IPL, while the second quarter cannot be as big in terms of numbers.  Our niche channels and Hindi movie business have done very well as have Music, English, SAB (TV) and all the other channels. Our challenge as you know is as far as ratings are only on Sony (TV), but apart from that everything else is doing extremely well. If you take away IPL, Q2 is far better than Q1 (FY2015) and from last year’s Q2,” he said.

He further added that Q2 has been phenomenal for the network in terms of revenue growth due to the (ad) revenues from the festive season. The previous year he added was disastrous as the economy was really down and it affected the brand spends in various categories.

Network 18’s consolidated operating revenues increased by 5.1% since Q1FY2015 and were up by 11.2% compared with Q2FY2014. The network’s income from operations was Rs 744.8 crore compared to Rs 708.4 crore in Q1FY2015 and Rs 669.8 crore in Q2FY2014. While this was so, the total expenses during the quarter was Rs 746.9 crore, resulting in a Rs 2.1 crore loss from operations before other income financial costs, exceptional items, prior period items and tax. The loss has been more than what was incurred during the corresponding quarter of the previous financial year (Rs 0.3 crore) but has reduced since the last quarter, which was Rs 25.1 crore. Network 18 finally incurred a loss of Rs 14.8 crore during the quarter. This is much less than Q1FY2015 were final loss (loss before tax) amounted to Rs 1,152 crore.

TV18 Broadcast Ltd. on the other hand did reasonably well in comparison to the previous quarter. The total income from operations for Q2FY2015 amounted to Rs 553.7 crore compared with Rs 527.7 crore in Q1FY2015 and Rs 483.2 crore in Q2FY2014. The total expenses for the quarter saw little difference from the last quarter, which was Rs 508 crore in Q2FY2015 and Rs 509.5 crore in Q1FY2015, but had increased considerable since the corresponding quarter Rs 455.9 crore. The total profit for the quarter was Rs 46.6 crore as against the loss of Rs 214.2 crore in Q1FY2015. The profit from ordinary activities before tax in the corresponding quarter was only Rs 12.1 crore. This shows that the network has done considerable well during this quarter.

Chennai-based Raj Television Network net profit reduced sharply by 78.2% during Q2FY2014 to Rs 7.55 million from Rs 34.6 million in the corresponding quarter of the previous fiscal. The net profit during this quarter is also much lower than the preceding quarter where it was Rs 26.7 million. The income from operations was up 9.4% compared to Q2FY2014 where income grew to Rs 200.75 million from Rs 183.5 million in the corresponding quarter and grew from Rs 191.11 million in Q1FY2015. The jump in expenses is one of the reasons for the fall in profits during this quarter for Raj TV Network where expenses rose by as much as 34.57% compared with the corresponding quarter. In Q2FY2015 expenses were Rs 176.1 million while it was Rs 130.8 million in Q2FY2014 and Rs 140 million in Q1FY2015.  

Consensus on Q2 performance of broadcasters

Going by these results, Q2 during this financial year has not been exceptionally good. In comparison to Q1, growth has been in lower, single-digit numbers for TV networks. While revenues of networks such as ZEEL and Raj TV Network have reduced, others such as Network18 just managed to recover from the losses incurred in the last quarter. For MSM on the other hand, revenues will be lower in comparison to Q1 due to the large revenues it gets from IPL during the quarter. 

Speaking on this Balakrishna PM, COO, Allied Media, Percept Group said, “The (entire) data is not really in and one will have to just give it some time before we get a fair idea. As far as the listed companies are concerned, I don’t think anybody has been performing that well this quarter. I think they have all been on par with how they had probably done last year. The market has not been at its best and neither has overall volumes. While it has not been the best of results, it is not the bad either.”

While this maybe so, Harish Shriyan, COO, OMD India said broadcasters have received advertising support during the festive season. “With own list of clients there is decent amount of money which is being invested across all categories. Therefore I do feel there is a decent amount of traction which is gone into the broadcaster”. 

Q2 overall has been a sluggish quarter for TV broadcast networks. We can probably hope for much better result in the next quarter considering it is the peak of the festive season. 


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